BATON ROUGE, La. — Today, the Tax Foundation in collaboration with KPMG released a new 50-state analysis of business tax burdens in the U.S. that indicates Louisiana's business tax competitiveness has improved significantly over the past few years.
The Tax Foundation ranking, Location Matters: A Comparative Analysis of State Tax Costs on Business, indicates Louisiana now ranks No. 2 (second-lowest state-and-local tax burden) in the U.S. for new firms and No. 10 for mature firms. Considering only Southern states, the Tax Foundation study ranks Louisiana No. 1 for new firms and No. 3 for mature firms.
In 2002, the Public Affairs Research Council of Louisiana (PAR) published Corporate Tax Burdens in the Southern States: A Comparison, a study utilizing a similar methodology as that of the Tax Foundation but focusing only on 12 Southern states. The PAR study indicated Louisiana's average rank in its study was No. 10 for mature firms analyzed in the 12-state pool. Accordingly, Louisiana's business tax competitiveness has improved significantly since 2002 based on the results of the new Tax Foundation analysis.
Gov. Bobby Jindal and the Louisiana Legislature have enacted several tax reforms and targeted incentive program enhancements that generated or accelerated improvements in Louisiana's business tax competitiveness. Specifically, since 2008 the state accelerated the elimination of its sales taxes on manufacturing machinery and equipment and elimination of business debt as a basis for corporate franchise taxes; eliminated the sales tax on business utilities and natural gas; substantially enhanced Louisiana's research-and-development tax credit; extended the Quality Jobs incentive; and maintained the Industrial Tax Exemption Program. The state also offers one of the lowest unemployment insurance tax burdens in the U.S.
Gov. Jindal said, "Economic development has been our top priority since day one. By eliminating harmful business taxes and enhancing economic development incentive programs, we have made Louisiana a more attractive place to do business. Louisiana has now reached its highest position ever on every significant national ranking of state business climates. We are making progress, but we still have more work to do to improve our economic competitiveness and make Louisiana the best place in the world to create and grow businesses and find a rewarding career. To continue to grow our economy and make our state more competitive, it's critical that we adopt bold education reforms to dramatically improve student achievement levels and graduation rates, which will help our state attract the jobs of the future."
To rank the 50 states, the Tax Foundation and KPMG analyzed state/local tax burdens for seven firm types, including a corporate headquarters, research-and-development facility, retail operation, call center, distribution facility, capital-intensive manufacturer and labor-intensive manufacturer. Financial data, tax rates, exemptions and incentives for the 50 states were then applied to both startup/new operations and pre-existing (mature) businesses (i.e., those in operation 10 years or more). The PAR study in 2002 utilized a largely similar approach.
Ten years ago, PAR cited a Louisiana sales tax on manufacturing machinery and equipment, a tax now eliminated, as a reason Louisiana sales taxes for manufacturers were three times the Southern average. That disadvantage saddled Louisiana with the second-heaviest state and local tax burden for an average manufacturer, PAR concluded.
Today, the Tax Foundation ranks Louisiana No. 1 in the U.S. in overall tax competitiveness for new manufacturing operations, both those that rely heavily on labor investment and those that rely more heavily on capital investment. In addition, Louisiana ranks No. 1 in the U.S. in overall tax competitiveness for both new and mature research-and-development facilities.
Louisiana Economic Development Secretary Stephen Moret said, "State-and-local business tax burdens have a significant impact on where companies choose to locate new business investment and jobs within the United States. A more competitive business tax environment helps our existing businesses to retain jobs and create new jobs in our state."
Louisiana is one of only two states in the South, along with Georgia, to rank among the Top 10 states in overall tax competitiveness for both mature firms and new firms. The four other states that achieved Top 10 status in both categories are from the Midwest or West (Ohio, Nebraska, Wyoming, Utah). For more details about the study, visit taxfoundation.org.